For all the talk of recession, CFOs are one group not worried. CFO optimism on the U.S. economy dropped only slightly, to 67.6 from 68.6 recorded in the second quarter, in the most recent "CFO Outlook Survey," a quarterly survey conducted by Financial Executives International and Baruch College's Zicklin School of Business. CFOs were even more optimistic about their company's prospects: optimism dipped imperceptibly to 75.5 from 76.3 last quarter. "CEOs are less gloomy than the media suggest," said Zicklin School of Business' Dean John Elliott, adding that CFOs foresee double-digit profit growth on average. The executives' biggest worry? Twenty-nine percent cited competition as one of their top concerns. Of those surveyed, 35.5% expect to spend more on product investment, and over half said they are looking for talent to add to the finance department. The survey of 171 corporate CFOs was conducted on Sept. 18.
SIX DEGRESS OF SOX
In doing away with the practice of interlocking boards and cutting back on directors who held multiple directorships, the Sarbanes-Oxley Act was supposed to put an end to the "old boy" network that had made abuses possible. But a study by Jackie Cook for The Corporate Library, titled "Survey of U.S. Corporate Board Structure and Board Network: 2002-2005," finds that while the worst abuses have diminished, the network is far from dead.
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True, SOX is cutting down on the average number of directorships by any one board member. But while "there are fewer links between boards, overall the board network is holding together," says Cook, a senior research associate and expert in social network analysis. The reason? While the busiest directors may be shedding multiple directorships, there are now more directors serving on two boards. The number of directors holding down more than two directorships at Standard & Poor's 500 companies has declined (301 in 2002 vs. 261 in 2005), but more directors are holding two directorships (529 in 2002 vs. 602 in 2005). When it comes to smaller companies, SOX has had no impact: In 2002, directors at the S&P MidCap and SmallCap companies averaged 1.26 directorships, vs. 1.25 in 2005.
But while the average number of directorships is down slightly, total remuneration for independent directors at the 500 largest U.S. companies climbed 14% last year, from $162,363 to $185,000, according to executive compensation consultant Steven Hall & Partners. Contributing to the increase were higher cash retainers (up 11%) and committee chairmanship (up 25% to 80%). Competition to recruit directors is also having an effect: Small companies are paying more to directors. The analysis of the top 500 was part of a larger study of the 1,000 biggest U.S. companies, which found companies abandoning the fee for attendance practice. Another notable trend: Option grants to board members are on the wane. While 95% of the 1,000 biggest companies award equity to directors, only 23% are paying solely in options, and less than half grant options at all.
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